Applied Value Engineering

What is Applied Value Engineering (AVE)? Examines cost and functions of systems and components to ensure best value and effectives of the technical solution. AVE are all the spontaneous investigations of value performed by a contractor in the later stages of a project.  The ability to use AVE is significantly influenced by the procurement route, traditional routes where the contractor was not involved in the initial design make it hard for the contractor to convince the client that further improvements can be made... AVE provides rigorous and structured approach to the development of design revisions. AVE attempts to mitigate the risk that a contractor's proposal will harm the project. Harm is caused if: functionality is inappropriately reduced OR a revised design no longer reflects the client's values Ideally, AVE incorporates function analysis and follows the Job Plan but sometimes may be impractical. Without rigorous examination of the problem, inappropriate design revisions may De-Cost a project by harming functionality or De-Spec a project by harming it's quality. There is particularly risk if there is unnecessary focus on construction costs. If undertaken correctly, cost-effective or value-adding solutions can be developed. Provides an auditable decision making trail.  Is simply a rigorous approach to decision making. Two ways of implementing AVE: Challenge based value engineering OR Applied Value Engineering Examples of AVE Applications Cost or time overruns in technical systems. Selection of alternatives to overcome long lead in times. Design revisions in response to site difficulties and client requests... Stages of a ProjectVM1 - Project Definition Develop best value business solution. Interpreting strategic need. Informs development of project success factors. VM2 - Concept Definition Develop best value concept design solution. Combines the business case with stakeholder expectations. Establishes function requirements. Informs the development of conceptual design. VM3 - Applied Value Engineering Develop best value technical solution Examines cost and function of systems and components. Ensures effectiveness of the solution. 1. Challenge Based Value Engineering Workshop is structured around the Job Plan to examine issues of significant magnitude that have become problematic for the whole project.  Typically comprise the design of a whole technical system. A technical team with the appropriate skills is assembled to form the workshop with a design team leader to facilitate. Increasing design fixity makes opportunities for changes to quickly expire.  Undertaken after design is substantially complete. Can result in redesign to achieve cost savings. 2. Spontaneous Applied Value Engineering Individuals/small groups of designers spontaneously adopt the Job Plan to rigorously consider value when proposing design revisions. Enables the clients values to influence design changes within technical systems. Workshops are generally not held, work is done by individuals/groups. Design revisions are proposed with supporting analysis of how they will provide value.  Due to it's timing, has different focus to value management. Less focus on the client, more focus on technical design. Rare to engage stakeholders in workshops unless the problem is client-related. Usually engineer led NOT facilitator led. Reasons for Unnecessary Cost Developing First workable solution is adopted without further examination. Designing blindly by precedent. Being reluctant to change. Pressure on speed of work. Barriers of This Method: Time pressure in the industry may prevent designers spending time considering value. Risk averse nature of the industry can limit willingness to explore better ways of providing client value. The 'good enough is best' attitude is common among engineers and are unwilling to incorporate the better alternatives they know of. Stages of Implementing an AVE Workshop Clarify the Scope of the Problem - Using two methods: value trees or stakeholder personas. Compile the Workshop Team - Assemble necessary technical team & determine if client body stakeholders need to be involved. Appoint a Facilitator Select tools and assemble a problem solving process, ideally incorporating Function Analysis. Design the Workshop Process - Ideally following the whole Job Plan. Establish a Proposal Review Method - To ensure alignment with client values where necessary. Defining the ProblemValue Trees Value Trees are simpler alternatives to FAST Diagrams. Functions are elicited and agreed using simple short phrases and sentences.  Function interdependencies are merely debated and agreed by participants.  Value trues are simpler and faster than FAST diagrams but are ambiguous and introduce risk of participants assigning different meaning to functions.  They can be found to be illogical and cannot be verified like FAST diagrams. Value trees do not indicate the client's priorities and therefore do not imply their underlying values.  Value Trees are limited to smaller studies of simple complexity where detailed function analysis & FAST diagramming isn't required. Stakeholder Personas If technical solutions require repeated input from a client body stakeholder, engaging them in the AVE workshop is impractical. The expectations and requirements of such a stakeholder can be summarised in a persona. This persona can then be referred to during the workshop. A persona cannot be a stereotype of typical expectations but must accurately reflect the specific expectations of the stakeholder. Personas only offer imperfect representations as the stakeholder may have not known they had certain values.  Analysing the ProblemFunction Analysis Allows the purpose of the design solution to be clarified/determined. Even if a design solution exists, focusing on it's functional roles will provide a more detailing understanding. Verb-noun expressions should be used if possible unless it is felt it would be incapable in providing the accuracy required to inform their redesign. It is more desirable to use verb-noun expressions as they carry with them agreed, social constructed understandings of their meanings. Function Cost Analysis Maps the distribution of cost across functions. Informs design revision decisions in determining if a component or element should be removed or re-designed due to the disproportionate amount of cost it consumes for the functions it provides.  The amount of cost/money allocated to a function should match the function importance. Function-Metric Matrix Provides a way to measure design performance in providing sought functionality.  Translates qualitative, intangible functions into quantitative, measurable metrics. As many functions are intangible, it is helpful to associate them with design performance. These metrics provide proxy measures for functionality. Translates soft design problems into engineering problems. Allows design options to be easily compared on a functional basis to determine the best option for implementation.  Creates audit trails and is more rigorous than judgement alone. Design Performance providing some functions might need to be measured with more than one metric (see image below)

Activities to Determine Which Project Solution Should be Implemented Pair-Wise Comparisons Weighted Evaluation Matrices Pair-Wise Comparisons Is a quick and simple way of establishing a rank preference order between competing options or factors. Implemented in very similar way as it is used to elicit the client's values but often with fewer options.  The concepts under comparison could be: functions, evaluation parameters or design options... The designers would consider which of the two options or factors represented by the cell's row & column is preferred with the winning option entered in the matrix cell.  Once complete, the number of times that an option has 'won' is counted to give a ranking. As the ranking is influenced by underlying value systems, the designer must clarify if the matrix should be compiled to represent their own preferences or that of the client's body using their personas. 

Weighted Evaluation Matrices A systematic approach to evaluating the performance of options against a set of performance criteria. The criteria will most likely be the functions that the design must fulfil (determined by past function analysis). Ideal for making complex design decisions which are too complex to rely on judgement alone. By documenting each step in the review, they are ideal for providing audit trails. Despite the systematic approach, an element of judgement is still required to reduce the risk of just 'following the numbers'. Weighted Evaluation Matrices only inform a judgement, the scores cannot dictate what the option should be. 

Value Engineering Change Proposals (VECP)VECPs document a contractor's voluntary recommendation of a design revision to a client which must include an incentive clause which define how the contractor will be rewarded if the change is adopted. Can happen at any time in a project. Informal Approach Informal AVE focuses on areas where difficulties in the design and construction aspects of a project are often encountered.  These difficulties may arise from problems with design coordination or aspects of the design which commonly 'go wrong'. Contractor's knowledge of these common difficulties mean they often spontaneously perform AVE studies so VECPs can be made. A common instance of informal AVE is the Contractor's provision of a Value Engineering Report alongside their tender submission. This is a common assumption from Contractors that a reduction in cost correlates an increase in value which is NOT the case. Formal Approach Contractor's prefer to offer VECPs as part of a formal mechanism in a contract.  The contract will provide clarity on the grounds which proposals can be developed & submitted and how they will be reviewed and how the benefit will be split between contractor and client (i.e. an incentive clause for the contractor). VECPs provide a formalised process by which the contractor can suggest changes to add value. Can happen at any time during the project, including construction. Content of a VECP Description of the proposed change. Listing of benefits and disadvantages of the change. List of changes required to the contract. Estimate of consequences on functionality. Estimate of consequences on resources (cost, time) Must provide sufficient information to allow the client to decide if the variation is appropriate.  Requirements for a VECP to US Government VECP must be permitted by the contract. Requires the contract to be changed. Must reduce costs. Must maintain essential functions or characteristics. Must include sufficient information for the client to make a decision. Describe time implications. Must NOT change the purpose or capacity of the building! Production of a VECP Clarify the the technical problem. Convene a workshop with stakeholders of the right technical expertise. Include client body representatives if the problem is 'client-touching'. Examine the functionality that the design element must provide and then think of alternative ways to provide that function. Note - These workshops are an opportunity to follow the Job Plan!Value Engineering 'Incentivisation Clauses' An incentive clause provides a mechanise, & reward to the contractor to develop VECPs. They ensure the client and not just the contractor benefits from AVE. Incorporating an incentive clause creates a strong commercial incentive for the practice of AVE by contractors.  Can cause Contractors to focus on cost alone and forget the role of functionality and he need to reflect the client's values. 

Value Management Improvement Programmes (VMIP) VMIPs extend the contractors ability to make VECPs in the earlier stages of design development (i.e. VM2 onwards) Therefore not suited to traditional procurement as the contractor would be brought in too late. VMIPs provide a contractual incentive for Contractors' to seek suggestions to improve value and how they would be rewarded if incorporated by the client.  Applied Value Engineering Opportunities in Contracts JCT05 SBC/Q (Revision 2) Schedule 8 - Encourages the contractor to propose changes to the design and specification that may benefit the employer. NEC3 ECC Risk Reduction Meetings - Undertaken to make & consider proposals for how the effect of the registered risk can be avoided or reduced and what solution would bring an advantages to all those who are affected (AVE workshop is ideal for developing these proposals)

Page 1

Page 2

Page 3